Term life insurance vs insurance-as-investment

Meera’s family would need about ₹61 lakh if she died tomorrow, and an invented savings plan for ₹50,000 a year covers her for ₹5,00,000. The same plan, held for 20 years, returns 2.20 % a year on its premiums at the lower of the two returns its illustration shows.

This lesson sizes life cover by the needs method, lists what to compare in a term plan, works out the yearly return hidden in a savings-plan illustration, sets term cover and saving the difference beside it with every assumption stated, and applies the tax rules on premiums and payouts. It is education only: Meera, every plan, premium and return are invented or assumed, and no insurer, plan or product is recommended.

Life cover replaces income that someone depends on

Life insurance answers one question: who would lose money if you died? If nobody depends on your income, a life payout protects nobody yet. Meera’s daughter is 8, and Meera’s income pays for everything they spend, so her death would leave a gap the size of the money the family would still need. The needs methodneeds method: A way to size life cover: the family's living costs for the years it needs support, plus loans and goals, less savings and the cover already in place. adds that up: living costs for the years the family needs them, the loans it would have to repay, the goals it would still pay for, less the savings and the cover it already has. Step through Meera’s:

The program works it three ways, then makes a cross-check:

"""How much life cover Meera needs: the needs method, three ways, and human life value as a cross-check.

Meera (invented) is 32 and her daughter is 8. The family spends ₹4,00,000 a year, she owes ₹15,00,000 on a home loan
and has ₹3,00,000 of savings the family could use. She already has ₹2,00,000 of life cover from PMJJBY. The method is
that of MySmartCoPilot's life insurance calculator: living costs for the years the family needs them, paid at the
start of each year and rising with inflation, discounted at what the payout could earn; plus loans; plus goals,
inflated to their date and discounted back; less savings. The rates are assumptions written down for the arithmetic.
"""

from decimal import ROUND_HALF_UP, Decimal, getcontext

getcontext().prec = 34
EXPENSES, YEARS, LOAN, SAVINGS, HAVE = Decimal(400000), 10, Decimal(1500000), Decimal(300000), Decimal(200000)
INFLATION, RETURN = Decimal("0.06"), Decimal("0.07")
COLLEGE, COLLEGE_YEARS, COLLEGE_RISE = Decimal(1000000), 10, Decimal("0.08")


def inr(amount):
    value = Decimal(amount).quantize(Decimal("1"), rounding=ROUND_HALF_UP)
    whole = str(abs(value))
    head, tail = whole[:-3], whole[-3:]
    groups = []
    while len(head) > 2:
        groups.insert(0, head[-2:])
        head = head[:-2]
    if head:
        groups.insert(0, head)
    return "₹" + (",".join(groups + [tail]) if groups else tail)


def costs_today(expense, years, inflation, rate):
    """Present value of a yearly cost paid at the start of each year, rising with inflation (a growing annuity due)."""
    k = (1 + inflation) / (1 + rate)
    return expense * years if k == 1 else expense * (1 - k**years) / (1 - k)


simple = EXPENSES * YEARS + LOAN - SAVINGS
print("Part 1: the needs method in today's rupees, nothing discounted")
print(f"  {YEARS} years × {inr(EXPENSES)} + loan {inr(LOAN)} − savings {inr(SAVINGS)} = {inr(simple)}")
print()
living = costs_today(EXPENSES, YEARS, INFLATION, RETURN)
needs = living + LOAN - SAVINGS
print("Part 2: costs rising 6 % a year, the payout earning 7 %")
print(f"  living costs for {YEARS} years, valued today: {inr(living)}")
print(f"  with the loan and less savings: {inr(needs)}")
college_then = COLLEGE * (1 + COLLEGE_RISE) ** COLLEGE_YEARS
college_now = college_then / (1 + RETURN) ** COLLEGE_YEARS
with_goal = needs + college_now
print(f"  her daughter's college, ₹10,00,000 today, rising 8 % a year: {inr(college_then)} in {COLLEGE_YEARS} years,")
print(f"    worth {inr(college_now)} today; needs with the goal: {inr(with_goal)}")
print(f"  less the PMJJBY cover she has: a gap of {inr(with_goal - HAVE)}")
print()
income, own, growth, years_left = Decimal(800000), Decimal(150000), Decimal("0.05"), 28
k = (1 + growth) / (1 + RETURN)
hlv = (income - own) * (1 - k**years_left) / (RETURN - growth)
print("Part 3: human life value, as a cross-check")
print(f"  {inr(income)} a year after tax less {inr(own)} she spends on herself, rising 5 % a year,")
print(f"  for the {years_left} years to 60, discounted at 7 %: {inr(hlv)}, {hlv / income:.1f} times her income")

Part 1: the needs method in today's rupees, nothing discounted
  10 years × ₹4,00,000 + loan ₹15,00,000 − savings ₹3,00,000 = ₹52,00,000

Part 2: costs rising 6 % a year, the payout earning 7 %
  living costs for 10 years, valued today: ₹38,35,900
  with the loan and less savings: ₹50,35,900
  her daughter's college, ₹10,00,000 today, rising 8 % a year: ₹21,58,925 in 10 years,
    worth ₹10,97,488 today; needs with the goal: ₹61,33,388
  less the PMJJBY cover she has: a gap of ₹59,33,388

Part 3: human life value, as a cross-check
  ₹8,00,000 a year after tax less ₹1,50,000 she spends on herself, rising 5 % a year,
  for the 28 years to 60, discounted at 7 %: ₹1,33,38,127, 16.7 times her income

The simplest version, ten years of ₹4,00,000 plus the ₹15,00,000 loan less ₹3,00,000 of savings, is ₹52 lakh. Valued properly, with costs rising 6 % a year and the payout earning 7 %, the living costs are worth ₹38,35,900 today, and with the loan, the college fund and her savings the family needs ₹61,33,388; less her ₹2,00,000 from PMJJBY, the gap is ₹59,33,388. The cross-check, human life valuehuman life value: The present value of what a person's income adds to the family until retirement: income after tax less their own spending, rising and discounted. It is the most life cover could replace., prices what her earning years are worth to the family, ₹1,33,38,127 at the same rates, 16.7 times her income: the most cover could ever replace.

Salaried readers have one more piece of cover to count: EDLI, which EPFO pays to a member’s family only on a death in service, up to ₹7 lakh, so it ends with the job. The government’s PMJJBY covers account holders aged 18 to 50 for ₹2,00,000 for ₹436 a year, renewed every year.

A term plan is pure cover, so compare its features, not its brand

A term planterm insurance: Life insurance that pays its sum assured if the insured dies within the term and nothing if they outlive it. With no saving inside, its premium buys cover alone. pays its sum assured if you die within the term, and nothing if you outlive it. With no savings inside, the premium buys cover alone, which is why, in this lesson’s invented quotes, ₹60 lakh of term cover costs ₹11,000 a year while a savings plan charges ₹50,000 for ₹5,00,000. For the same reason IRDAI does not require a benefit illustration for a regular-premium pure term plan: there is no maturity value to illustrate. What separates one term plan from another is a short list of features, each of which you can read on the quote and in the wording:

The rules around a claim are the same for every insurer, and they favour honest proposals. A life policy cannot be contested on any ground three years after it is issued, starts its cover or is revived. Before that, a wrong answer on the proposal can be the reason a claim is refused, so every illness, habit and other policy belongs on the form. The nominee named on the policy receives the money. A claim that is cut or refused can go from the insurer to the Insurance Ombudsmanombudsman: An official who settles customers' complaints against firms in one sector at no fee, such as the RBI Ombudsman for banks or the Insurance Ombudsman. The complaint must go to the firm first. More in “Who regulates your money in India” within a year of the insurer’s reply.

A savings plan’s illustration hides a yearly return you can work out

A savings plan, an endowment or a unit-linked plan, mixes cover with saving, and IRDAI requires a customised benefit illustrationbenefit illustration: A document a life insurer must give before selling a policy with savings, showing its benefits year by year at assumed gross returns of 4 % and 8 %, signed by the buyer and the seller. before it is sold, which you and the seller both sign. It shows the benefits year by year at two gross investment returns that IRDAI sets, 4 % and 8 % a year, and says plainly that these are neither the lowest nor the highest you might get. It does not show the yearly return on your premiums. You work that out with the method of the lesson on measuring returns: the rate at which the premiums, compounded to the maturity date, equal the maturity value. Walk through an invented plan’s 20 years:

The program finds the rate for both illustrated values and prints what the plan returns on the way:

"""The yearly return hidden in an invented savings-plan illustration, and what leaving early returns.

The invented plan: ₹50,000 a year at the start of each of the first 15 policy years, a 20-year term, a sum assured of
₹5,00,000, and a maturity value at the end of year 20 that its benefit illustration shows at the two gross investment
returns IRDAI stipulates, 4 % and 8 % a year: ₹10,00,000 and ₹13,50,000 (both invented). The internal rate of return
is the yearly rate at which the premiums, compounded to year 20, equal the maturity value. The surrender values are the
minimum guaranteed surrender values of the IRDAI (Insurance Products) Regulations, 2024 for a regular-premium plan.
"""

from decimal import ROUND_HALF_UP, Decimal, getcontext

getcontext().prec = 34
PREMIUM, PAYING, TERM, ASSURED = Decimal(50000), 15, 20, Decimal(500000)
MATURITY = {"4 %": Decimal(1000000), "8 %": Decimal(1350000)}


def inr(amount):
    value = Decimal(amount).quantize(Decimal("1"), rounding=ROUND_HALF_UP)
    whole = str(abs(value))
    head, tail = whole[:-3], whole[-3:]
    groups = []
    while len(head) > 2:
        groups.insert(0, head[-2:])
        head = head[:-2]
    if head:
        groups.insert(0, head)
    return "₹" + (",".join(groups + [tail]) if groups else tail)


def premiums_grown(rate):
    """The premiums, paid at the start of years 1 to 15, compounded to the end of year 20."""
    return sum(PREMIUM * (1 + rate) ** (TERM - t) for t in range(PAYING))


def irr(maturity):
    lo, hi = Decimal(0), Decimal("0.2")
    for _ in range(200):
        mid = (lo + hi) / 2
        if premiums_grown(mid) < maturity:
            lo = mid
        else:
            hi = mid
    return (lo + hi) / 2


print(f"Premiums paid: {PAYING} × {inr(PREMIUM)} = {inr(PREMIUM * PAYING)}")
for scenario, maturity in MATURITY.items():
    rate = irr(maturity)
    print(f"  illustrated at {scenario} gross: {inr(maturity)} at the end of year {TERM}; internal return {rate * 100:.2f} % a year")
print()
print("Leaving early: the minimum guaranteed surrender value")
SCHEDULE = [(2, Decimal("0.30")), (3, Decimal("0.35")), (5, Decimal("0.50")), (7, Decimal("0.50"))]
for year, share in SCHEDULE:
    paid = PREMIUM * min(year, PAYING)
    print(f"  surrendered in year {year}: {share * 100:.0f} % of {inr(paid)} paid = {inr(paid * share)}")
paid = PREMIUM * PAYING
print(f"  surrendered in year 19 or 20: 90 % of {inr(paid)} paid = {inr(paid * Decimal('0.90'))}")
print()
print("Cover in the meantime: the sum assured or 105 % of the premiums paid, whichever is higher")
for year in (1, 5, 10, 15):
    cover = max(ASSURED, PREMIUM * year * Decimal("1.05"))
    print(f"  year {year:>2}: {inr(cover)}")

Premiums paid: 15 × ₹50,000 = ₹7,50,000
  illustrated at 4 % gross: ₹10,00,000 at the end of year 20; internal return 2.20 % a year
  illustrated at 8 % gross: ₹13,50,000 at the end of year 20; internal return 4.48 % a year

Leaving early: the minimum guaranteed surrender value
  surrendered in year 2: 30 % of ₹1,00,000 paid = ₹30,000
  surrendered in year 3: 35 % of ₹1,50,000 paid = ₹52,500
  surrendered in year 5: 50 % of ₹2,50,000 paid = ₹1,25,000
  surrendered in year 7: 50 % of ₹3,50,000 paid = ₹1,75,000
  surrendered in year 19 or 20: 90 % of ₹7,50,000 paid = ₹6,75,000

Cover in the meantime: the sum assured or 105 % of the premiums paid, whichever is higher
  year  1: ₹5,00,000
  year  5: ₹5,00,000
  year 10: ₹5,25,000
  year 15: ₹7,87,500

₹7,50,000 of premiums becoming ₹10,00,000 after 20 years is 2.20 % a year, and ₹13,50,000 is 4.48 %. Leaving early costs more: IRDAI’s minimum guaranteed surrender valuesurrender value: What a life policy pays if it is ended before its term. The regulations set a minimum guaranteed value, from 30 % of the premiums paid in year 2, and the insurer's special surrender value may be higher. is 30 % of the premiums paid in year 2, 35 % in year 3 and 50 % in years 4 to 7, rising to 90 % in the last two years, though an insurer’s special surrender value may be higher. Meanwhile the cover is the sum assured or 105 % of the premiums paid, whichever is higher: ₹7,87,500 at most.

Term cover and saving the difference, with the assumptions written down

The fair comparison spends the same money both ways. Plan A is the savings plan, ₹50,000 a year for 15 years. Plan B buys ₹60 lakh of term cover to age 60 for an invented ₹11,000 a year and puts the other ₹39,000 into a deposit in the same 15 years; in years 16 to 20 the deposit pays the term premium, so both plans take exactly the same rupees from Meera. The deposit’s return is an assumption, so the program shows two:

"""The same ₹50,000 a year two ways: the invented savings plan, or term cover with the rest saved.

Plan A is the savings plan of illustration.py: ₹50,000 a year for 15 years, cover of ₹5,00,000 or 105 % of the
premiums paid, and ₹10,00,000 (illustrated at 4 %) or ₹13,50,000 (at 8 %) at the end of year 20.
Plan B buys term cover of ₹60,00,000 to age 60 for an invented ₹11,000 a year and puts the other ₹39,000 into a
deposit at the start of each of the same 15 years; in years 16 to 20 the deposit pays the term premium, so both plans
take exactly the same money from Meera. The deposit's yearly return is an assumption, shown at 4 % and at 7 %.
Nothing here is a recommendation of any product.
"""

from decimal import ROUND_HALF_UP, Decimal

TERM_PREMIUM, SAVE, PAYING, YEARS = Decimal(11000), Decimal(39000), 15, 20
COVER = Decimal(6000000)


def inr(amount):
    value = Decimal(amount).quantize(Decimal("1"), rounding=ROUND_HALF_UP)
    whole = str(abs(value))
    head, tail = whole[:-3], whole[-3:]
    groups = []
    while len(head) > 2:
        groups.insert(0, head[-2:])
        head = head[:-2]
    if head:
        groups.insert(0, head)
    return "₹" + (",".join(groups + [tail]) if groups else tail)


def deposit_path(rate):
    """The deposit at the end of each year: money in at the start of the year, then a year's growth."""
    balance, path = Decimal(0), []
    for year in range(1, YEARS + 1):
        balance += SAVE if year <= PAYING else -TERM_PREMIUM
        balance *= 1 + rate
        path.append(balance)
    return path


print("Plan A, the savings plan: cover ₹5,00,000 to ₹7,87,500; at year 20, ₹10,00,000 at 4 % or ₹13,50,000 at 8 %")
print()
for label, rate in (("4 %", Decimal("0.04")), ("7 %", Decimal("0.07"))):
    path = deposit_path(rate)
    print(f"Plan B with the deposit at an assumed {label} a year:")
    for year in (1, 5, 10, 15, 20):
        print(f"  end of year {year:>2}: deposit {inr(path[year - 1])}; if Meera died that year, {inr(COVER + path[year - 1])} in all")
    print()
print("From year 21 to age 60, Plan B's term cover still costs ₹11,000 a year; Plan A has ended.")

Plan A, the savings plan: cover ₹5,00,000 to ₹7,87,500; at year 20, ₹10,00,000 at 4 % or ₹13,50,000 at 8 %

Plan B with the deposit at an assumed 4 % a year:
  end of year  1: deposit ₹40,560; if Meera died that year, ₹60,40,560 in all
  end of year  5: deposit ₹2,19,686; if Meera died that year, ₹62,19,686 in all
  end of year 10: deposit ₹4,86,968; if Meera died that year, ₹64,86,968 in all
  end of year 15: deposit ₹8,12,157; if Meera died that year, ₹68,12,157 in all
  end of year 20: deposit ₹9,26,150; if Meera died that year, ₹69,26,150 in all

Plan B with the deposit at an assumed 7 % a year:
  end of year  1: deposit ₹41,730; if Meera died that year, ₹60,41,730 in all
  end of year  5: deposit ₹2,39,978; if Meera died that year, ₹62,39,978 in all
  end of year 10: deposit ₹5,76,560; if Meera died that year, ₹65,76,560 in all
  end of year 15: deposit ₹10,48,634; if Meera died that year, ₹70,48,634 in all
  end of year 20: deposit ₹14,03,077; if Meera died that year, ₹74,03,077 in all

From year 21 to age 60, Plan B's term cover still costs ₹11,000 a year; Plan A has ended.

The results cut both ways. At an assumed 4 % the deposit ends year 20 at ₹9,26,150, below the plan’s ₹10,00,000 at its 4 % illustration; at 7 % it ends at ₹14,03,077, above the plan’s ₹13,50,000 at 8 %. The deposit’s interest is taxed every year, which lowers its result, while the plan’s maturity may be tax-free, as the next section shows. What the numbers never change is the cover: had Meera died in year 5, Plan A paid ₹5,00,000 and Plan B more than ₹62 lakh. Answer three questions about your own case:

In short: with dependants, a savings plan’s cover is far below their needs and term cover is what protects them; saving the difference works only if the money goes in every year; and anyone who may need the money early gives up half or more of it by surrendering a savings plan in its first years.

Death proceeds are tax-free; a maturity value must pass two tests

The Income-tax Act, 2025 treats the two ways a life policy pays very differently. Schedule II (Table: Sl. No. 2) leaves any sum received on the death of the insured out of total income. A maturity value, or any other payout, is left out only if the policy passes its tests, and for a non-linked policy issued in FY 2023-24 or later there are two: a premium of at most 10 % of the actual capital sum assured, or 15 % for a special policy such as one on a person with a disability, and premiums of all such policies of at most ₹5,00,000 in any tax year of their terms. For a unit-linked policy the second limit is ₹2,50,000. Follow a policy that fails the first test:

The program applies the tests to three invented policies:

"""Is a life policy's payout taxed? Three invented non-linked policies, under the Income-tax Act, 2025.

Schedule II (Table: Sl. No. 2) leaves a payout out of total income when it is received on death, and otherwise only
when the policy passes its conditions; for a non-linked policy issued in FY 2023-24 or later: a premium of at most
10 % of the actual capital sum assured (15 % for a special policy), and premiums of all such policies of at most
₹5,00,000 in any tax year of their terms. A payout that fails is taxed under section 92(2)(l) on the amount above the
premiums paid and not claimed as a deduction, and the insurer deducts tax at 2 % of that income when the payout is
above ₹1,00,000 (section 393(1), Table: Sl. No. 8(i)). All three policyholders here claimed no deduction.
"""

from decimal import ROUND_HALF_UP, Decimal

POLICIES = [
    # name, yearly premium, sum assured, years paid, maturity value, premiums of all such policies in a year
    ("Plan 1", Decimal(50000), Decimal(500000), 15, Decimal(1000000), Decimal(50000)),
    ("Plan 2", Decimal(50000), Decimal(400000), 15, Decimal(1000000), Decimal(50000)),
    ("Plan 3", Decimal(300000), Decimal(3000000), 10, Decimal(4200000), Decimal(600000)),
]


def inr(amount):
    value = Decimal(amount).quantize(Decimal("1"), rounding=ROUND_HALF_UP)
    whole = str(abs(value))
    head, tail = whole[:-3], whole[-3:]
    groups = []
    while len(head) > 2:
        groups.insert(0, head[-2:])
        head = head[:-2]
    if head:
        groups.insert(0, head)
    return "₹" + (",".join(groups + [tail]) if groups else tail)


for name, premium, assured, years, maturity, all_premiums in POLICIES:
    ratio = premium / assured
    fails = []
    if ratio > Decimal("0.10"):
        fails.append(f"premium is {ratio * 100:.1f} % of the sum assured, above 10 %")
    if all_premiums > Decimal(500000):
        fails.append(f"premiums of all such policies are {inr(all_premiums)} a year, above ₹5,00,000")
    print(f"{name}: {inr(premium)} a year for {years} years, sum assured {inr(assured)}, maturity {inr(maturity)}")
    if not fails:
        print("  passes both tests: the maturity value is left out of total income")
    else:
        income = maturity - premium * years
        tds = income * Decimal("0.02") if maturity > Decimal(100000) else Decimal(0)
        print(f"  fails: {'; '.join(fails)}")
        print(f"  taxable: {inr(maturity)} − {inr(premium * years)} of premiums = {inr(income)}; TDS at 2 % = {inr(tds)}")
    print("  paid on death instead, the whole amount is left out of total income")
    print()

Plan 1: ₹50,000 a year for 15 years, sum assured ₹5,00,000, maturity ₹10,00,000
  passes both tests: the maturity value is left out of total income
  paid on death instead, the whole amount is left out of total income

Plan 2: ₹50,000 a year for 15 years, sum assured ₹4,00,000, maturity ₹10,00,000
  fails: premium is 12.5 % of the sum assured, above 10 %
  taxable: ₹10,00,000 − ₹7,50,000 of premiums = ₹2,50,000; TDS at 2 % = ₹5,000
  paid on death instead, the whole amount is left out of total income

Plan 3: ₹3,00,000 a year for 10 years, sum assured ₹30,00,000, maturity ₹42,00,000
  fails: premiums of all such policies are ₹6,00,000 a year, above ₹5,00,000
  taxable: ₹42,00,000 − ₹30,00,000 of premiums = ₹12,00,000; TDS at 2 % = ₹24,000
  paid on death instead, the whole amount is left out of total income

Plan 1, at exactly 10 %, is tax-free. Plan 2’s premium is 12.5 % of its sum assured, so its ₹2,50,000 above the premiums paid is income from other sources under section 92(2)(l), and the insurer deducts tax at 2 % of that income, ₹5,000, under section 393(1). Plan 3 passes the ratio but its holder pays ₹6,00,000 a year across such policies, so ₹12,00,000 is taxed. Paid on death instead, all three would be tax-free. Premiums bring their own rule in the old regime: they count within section 123’s ₹1,50,000 only up to 10 % of the actual capital sum assured (Schedule XV, paragraph 2), and premiums deducted that way are not subtracted again when a payout is taxed.

Practise: cover, plans, returns and tax

From the needs method to the tax tests, the five ideas return one question at a time, led by the one you have found hardest so far. Every plan in them is invented:

Interview questions

Warm-up (fresher): Why is a term plan’s premium so much lower than a savings plan’s for the same cover?

A term plan pays only if the insured dies within the term, and nothing if they outlive it, so its premium pays for the risk of death alone. A savings plan, an endowment or a unit-linked plan, also builds a value it must pay back at maturity or on surrender, so most of its premium is saving, with the insurer’s costs taken out along the way. In the lesson’s invented case, ₹50,000 a year buys ₹5,00,000 of cover in a savings plan, while ₹11,000 a year buys ₹60 lakh of term cover. The savings part can be judged by its own return: ₹7,50,000 of premiums becoming ₹10,00,000 in 20 years is 2.20 % a year.

Warm-up (fresher): When is the maturity amount of a life insurance policy tax-free?

Under Schedule II (Table: Sl. No. 2) of the Income-tax Act, 2025, a sum received on the insured’s death is always left out of income. A maturity value is left out only if the policy passes its tests: for a non-linked policy issued in FY 2023-24 or later, a premium of at most 10 % of the actual capital sum assured, or 15 % for a special policy, and premiums of all such policies of at most ₹5,00,000 in any tax year, ₹2,50,000 for unit-linked policies. A non-linked payout that fails is taxed on the amount above the premiums paid and not deducted, and the insurer deducts tax at 2 % of that income on payouts above ₹1,00,000.

Key takeaways

• Life cover replaces income someone depends on: the needs method adds living costs, loans and goals and subtracts savings and existing cover, ₹61,33,388 for Meera’s family against ₹52 lakh in its simplest form.
• A term plan pays only on death within its term, so compare the term, the sum assured, the premium span, the riders, the exclusions and the claim rules, and answer the proposal honestly.
• A savings plan’s illustration shows values at 4 % and 8 %, not a rate on your premiums: ₹7,50,000 becoming ₹10,00,000 in 20 years is 2.20 % a year, and surrendering in years 4 to 7 can return half of what was paid.
• Spending the same money on term cover and a deposit gives far more cover throughout, and more or less money at the end depending on the return assumed and the tax on it.
• Death proceeds are tax-free; a maturity value is tax-free only within the 10 % premium ratio and the ₹5,00,000 yearly limit, and a taxed payout carries TDS of 2 % of its income.